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Back to blog March 03, 2021 1 Comment Author: Andy Jones

21 Years of Private Equity Acquisitions

I thought it would be interesting to look at the trends in private equity platform acquisitions year-by-year, since 2000. The graphs below represent 47,394 private equity platform acquisitions over the last 21 years.

We can clearly see the dip in new acquisitions during the dot.com bust (2001 – 2003), the last recession (2009), the skittishness of 2019 (Q4 mostly), and the pandemic of 2020.

The graph below is the same data plotted monthly in orange (sorry I swapped colors). I have also included private equity exits in the bismark color. (Bismark is the proper name for the blue/green/gray color… I had to look it up).

Notable Points

  1. Seasonality – We almost always see a seasonal bump of deals closing in December (Happy Holidays right?), presumably in a mad rush to beat the year-end. You can see this in the year-end spikes in the graph above.
  2. 2012 – The largest spike at the end of 2012 was tax strategy driven. This shows the extent to which changes in tax code can impact industry.
  3. Q4-2019 – Deal flow was considerably lower in Q4-2019, pre-covid. This is most likely related to the skittishness of the market, starting in September 2019, and a direct consequence of Fed actions. The Fed started unwinding some of its mortgage-backed security positions it acquired during 2009 – 2014. As the Fed started selling, the market wouldn’t (or couldn’t) ingest it. It was simply too much on the sell-side. When the market began to falter (starting with the repo market), the Fed immediately reversed course and started buying back what it had just sold. With the Fed pumping considerable funds into the market, the equities market really took off (early 2020, pre-covid). You can read more about the actions of the Federal Reserve during this time period on my personal blog… but the main point is, private equity firms substantially reduced their acquisitions of new portfolio companies in late 2019. I think they collectively felt the water ahead might be turbulent, if not tumultuous.
  4. 2020 – Although deal flow picked up a bit in Q4-2020, relative to the great “Pause” in Q2 & Q3, it did not approach normal levels of deal activity on the acquisition side. However, it’s worth noting that private equity exits did approach normal historical levels. Is it that the private equity firms were de-risking, collectively moving more to cash in late 2020? Perhaps the industry is side-stepping the uncertainty of 2021, waiting to see where the dust settles before resuming acquisitions in full swing. It’s certainly not because the PE firms lack cash to invest. There is still an excess of capital to deploy… just not now… or at least, not yet.

1 Comment:

David Brophy 4 months ago

Great data collection! I am Director of the Center for Venture Capital and Private Equity Finance at the University of Michigan Ross School of Business and am interested in your 21 years of transaction from a teaching and research point of view. How can I subscribe to the database to use it for analytics research, perhaps with your firm as a partner if that would be of interest to you. I’d be happy to discuss this, at your convenience…

Best,
David